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Morgan Stanley's 8 Best Stock Ideas for 2011

6. Apple (AAPL - Get Report) sells consumer electronics, including MacBook laptops and the iPad tablet.

Fundamentals: Apple's 12-month sales have expanded 52%. Fiscal fourth-quarter net income surged 70% to $4.3 billion. Earnings per share advanced 68% to $4.64, restrained by a higher share count. Revenue grew 67%. The operating margin declined from 30% to 27%. Apple held $51 billion of cash and marketable securities at the end of the quarter and no debt, converting to a quick ratio of 1.7. It is one of the most liquid U.S. companies.

Valuation: Apple's stock trades at a trailing earnings multiple of 21 and a forward earnings multiple of 15, on par with computer and peripheral industry averages. Its book value multiple of 6.1, sales multiple of 4.5 and cash flow multiple of 16 reflect premiums of 27%, 39% and 17% to hardware and peripherals peer averages. Yet, the stock's PEG ratio of 0.8 indicates a 20% discount to estimated long-run fair value. Morgan Stanley's bull target is $500. Its bear target is $250.

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AAPL $124.24 0.70%
BWA $59.13 0.15%
SNI $69.38 -1.24%
TYC $42.69 -1.02%
UNP $108.17 -2.39%


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